1. Contract for raw jute supply — Dispute over payment and damages — Arbitration award challenged on grounds of contract voidance under Raw Jute (Central Jute Board and Miscellaneous Provisions) Act. (Para 1 , 2 , 5 )
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1959 Supreme(SC) 8
SUPREME COURT OF INDIA
20th January, 1959
S.R. DAS, C.J.I., S.K. DAS, P.B. GAJENDRAGADKAR, K.N. WANCHOO AND M. HIDAYATULLAH, JJ.
Jute and Gunny Brokers Ltd., Appellant
Versus
M/s. New Central Jute Mills Co. Ltd., Respondents.
Civil Appeal No. 92 of 1954.
Advocates Appeared
Mr. M. C. Setalvad, Attorney- General for India Mr. B. Sen, senior Advocate, (M/S. P. D. Himatsinghka and B. P. Maheshwari, Advocates, with them), for Appellant; Mr. N. C. Chatterjee, Senior Advocate (M/s. M. G. Peddar and Ganpat Rai, Advocates with him), for Respondents.
Advocates:
B.P.MAHESHVARI, B.SEN, GANPAT RAI, M.C.SETALVAD, M.G.PODDAR, N.C.CHATTERJI, P.D.HIMATSINGHKA
B.P.MAHESHVARI, B.SEN, GANPAT RAI, M.C.SETALVAD, M.G.PODDAR, N.C.CHATTERJI, P.D.HIMATSINGHKA
A statutory deeming provision treating a notification issued under a previous Ordinance as having been issued under a subsequent Act requires the notification to be read mutatis mutandis, substituting "Act" for "Ordinance" to give full effect to the legal fiction.
Headnote:(A) Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951 - Sections 2(1), 5, 6, 7 and 16 - Statutory fiction - Deeming provision - Notification issued under an Ordinance deemed to be issued under the Act - Interpretation of notification - When a statute provides that a notification issued under a preceding Ordinance shall be deemed to have been issued under the Act, the word "Ordinance" in such notification must be read as "Act" to give full effect to the statutory fiction. (Para 7)
Facts of the case:
A contract for the supply of raw jute was entered into through trade channels not prescribed by the relevant Act. Following a dispute over delivery and payment, an arbitration award was passed in favor of the supplier. The award was subsequently challenged on the ground that the underlying contract was void under the Act as it failed to comply with the mandatory procedures for entering into such contracts. The lower court declared the award null and void.
Findings of Court:
The contract was void as it was not entered into in the manner provided by the Act. The notification issued under the preceding Ordinance, by virtue of the deeming provision in the Act, effectively brought the relevant sections of the Act into force, rendering the non-compliant contract void.
Issues: Whether a notification that expressly referred to sections of an Ordinance could be interpreted as bringing the corresponding sections of a subsequent Act into force through a statutory deeming provision.
Ratio Decidendi: The court held that the creation of a statutory fiction compels the adoption of the principle of mutatis mutandis. To give full effect to the twin fictions created by the statute—that the Act commenced on a specific prior date and that a notification issued under the Ordinance is deemed to have been issued under the Act—the word "Ordinance" used in the notification must be read as "Act". (Para 7)
Result: Appeal dismissed.
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Table of Contents
2. Whether a notification specifying sections of a replaced Ordinance can be deemed to bring corresponding sections of the replacing Act into force via a statutory fiction. (Para 7 )
3. Statutory fictions requiring a notification under an Ordinance to be deemed issued under a replacing Act necessitate reading the term Ordinance as Act mutatis mutandis. (Para 7 )
4. A statutory fiction deeming a notification issued under a previous Ordinance as issued under a subsequent Act extends to reading the notification's terms as referring to the Act. (Para 7 )
5. Appeal dismissed. (Para 8 )
6. How does a statutory fiction operate when a replacing Act deems a notification issued under a previous Ordinance as having been issued under the Act?
The court held that such a fiction requires the application of the principle of mutatis mutandis, where the word Ordinance in the notification is substituted with Act to give full effect to the statutory fiction. (Para 7 )
7. Does a statutory fiction regarding the issuance of a notification stop at the act of issuance, or does it extend to the interpretation of the notification's content?
The fiction extends beyond the mere issuance of the notification to include the reading of the notification as having been issued under the Act, ensuring the legislation's purpose is fulfilled. (Para 7 )
Judgment
S. R. DAS, CJI. : This is an appeal filed upon a certificate of fitness granted by the High Court of Calcutta impugning the judgment pronounced by the said High Court on January 23, 1953, declaring null and void an award (No. 209 of 1952) made by the Bengal Chamber of Commerce in case No. 855 of 1951 whereby they ordered the respondent company to pay to the appellant company a sum of Rs. 1,95,000 besides interest and costs.
2. The facts giving rise to the present appeal are simple and may briefly be summarised as follows : On April 6, 1951, the appellant company entered into a contract with the respondent company for the supply of 5000 maunds of Nikhil and/or Ashuganj pate on certain prices according to quality, "shipment during July and/or August, 1951, guaranteed." That contract, which was entered into by bought and sold notes exchanged between the parties through brokers, contained a very wide arbitration clause. When shipping documents were presented to the respondent company by the bankers of the appellant company, they were not honoured on the plea that the same were not in order and the respondent company failed to take delivery of the goods. The last date on which the documents were so presented was September 17, 1951. On September 26, 1951, the appellant company, through their solicitors, wrote to the respondent company intimating that they had exercised their option of cancelling the contract and demanding the payment of the sum of Rs. 1,95,000 as damages on the basis of the difference between the contract price and the market price of the goods as on September 17, 1951. The respondent company having by their letter dated October 25, 1951, denied their liability to pay any amount, the appellant company on November 2, 1951 referred the dispute to the arbitration of the Bengal Chamber of Commerce in terms of the Arbitration clause contained in that contract. The respondent company submitted to the jurisdiction of the Tribunal of arbitration by appearing and adducing evidence before it. On February 29, 1952, the arbitrators made their award by which they allowed the claim of the appellant company in full with interest and costs. The award having been filed in the Calcutta High Court on April 23, 1952, the respondent company on June 9, 1952, filed an application in that Court praying, inter alia, that the award be declared null and void and be set aside. The main ground urged in that application was that the award was a nullity in that the contract containing the arbitration clause was void under the provisions of the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951 (W. Ben. VI of 1951) which was then in force. In order to appreciate the points raised before the High Court and before us it is necessary at this stage to refer to some of the statutory provisions bearing on the question.
3. To regulate the prices of jute and to empower the Government to fix its maximum prices, the West Bengal Legislature passed an Act called the West Bengal Jute (Control of Prices) Act (W. Ben. VI of 1950) which came into force on March 15, 1950. On December 14, 1950 the Government of West Bengal promulgated an Ordinance called the Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, 1950 (W. Ben. XVII of 1950) for the better regulation of the jute trade. The preamble to that Ordinance recited that, as the owners of jute mills were not being able to secure adequate supplies of jute on the maximum prices fixed under the West Bengal Jute (Control of Prices) Act, 1950, it had become expedient to set up a Central Jute Board in West Bengal or ensuring an equitable supply of raw jute to the owners of the jute mills. That Ordinance consisted of only 15 sections. Section 4 of that Ordinance provided for the constitution of the Central Jute Board. Section 5 was expressed in the following terms :
"5. (1) No person shall sell or agree to sell raw jute to the owner of a jute-mill and no owner of a jute mill s
